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Checking Out

Fed up with having to keep a minimum balance in your checking
account? Sick of banks slapping you with huge service fees every
time you withdraw your money?

More than ever, dissatisfaction with bank services has turned
people away from obtaining a checking account, according to the
Federal Reserve Board's 1998 Survey of Consumer Finances (SCF).

The SCF, an extensive triennial survey of U.S. households'
balance sheets and their use of financial services, found that
distaste for bank bureaucracy is one of the leading reasons why
13.2 percent of households did not open a checking account in
1998.

The great majority of those households without checking accounts
(82.6 percent) report incomes of less than $25,000, 61 percent of
households are headed by individuals under the age of 45, and 57
percent are nonwhite or Hispanic.

But a low income isn't the leading factor chasing potential
check writers away. In fact, only 12.9 percent of households
without checking accounts say that "not enough money" is the
sticking point, down from 20 percent in 1995, and 21.2 percent in
1989. And the percentage who said, "I do not write enough checks to
make it worthwhile" dropped from 34.4 percent in 1989 to 28.4
percent in 1998.

On the other hand, the number of households without checking
accounts who blame the absence on the fact that they "do not like
dealing with banks" rose to 18.5 percent, up from 15 percent in
1989. Altogether, 19.6 percent of households in 1998 report that
the minimum balance requirement or monthly service charge is too
high. Only 16.3 percent gave those as reasons in 1989.

Consumers who previously had a checking account feel the most
burned by rising bank costs. That group (47.9 percent of all
households without checking accounts) are much more likely to
report that fees were a deterrent and much less likely to report
that they do not write enough checks, according to the study.

But all of the extra fees and hassles have yet to stop the vast
majority of us from socking our money away in banks. The total
number of non-checking households dropped 6 percentage points from
1989. And that shows that banks are getting a bad rap, says John
Hall, a representative of the American Bankers Association. "It is
really more of a perception problem, not a reality," he says.
"There are accounts to serve everyone's needs. Many have little or
no minimum balance [requirements] and low monthly fees of $3.00 to
$5.00. They just need to ask."

For more information about the 1998 Survey of Consumer Finances,
visit www.federalreserve.gov/pubs/oss/oss2/98/scf98home.html